Gross National Product – Definition

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Gross National Product (GNP) Definition

GNP, known as Gross National Product, is the total amount of final goods and services that a country produces in a given year.

A Little More on What is Gross National Product

Gross National Product is the sum of personal consumption, personal domestic investment, government spending, net exports (exports less imports), and income received by local residents as a result of foreign investments, less income received by foreign residents as a result of local investments.

GNP refers to the amount of the total output that the residents of a nation produce. Considering this statement, GNP includes the output that nation’s residents generate beyond the nation’s boundaries, and excludes anything that is generated by foreign residents within the country. Also, GNP doesn’t take any intermediary products and services into consideration for avoiding double-counting problems.

Difference between GDP and GNP

GDP (Gross Domestic Product), when added to the net income received by local residents from beyond the nation’s boundaries, and subtracted from the net income that foreign residents receive from the investments made within the nation results in Gross National Product.

Talking about the discrepancy in GDP and GNP, the products and services that the firms of a nation produce within its boundaries is included in the GDP, but not GNP of the nation. It is so because the final output is not meant for consumption for domestic markets, and is sent to the foreign nations. Because of providing more accuracy in knowing how well the economy is performing, and how much income it is actually generating, GNP is preferred more over GDP.

The income generated from the sale of goods and services produced by foreign firms in a nation is transferred internationally to foreign residents. Then, there are times when local firms procure goods and services internationally, and sell them in the country, thereby bringing the income back to domestic residents. Such variations cause discrepancies in GDP and GNP.

The concept of GDP came into existence in the US in 1991 due to globalization of the whole economy. The foreign trade relations of nations are the major cause of difference between GDP and GNP.

Reference for Gross National Product

Academic Research on Gross National Product (GNP)

The prewar business cycle reconsidered: New estimates of gross national product, 1869-1908, Romer, C. D. (1989). Journal of Political Economy, 97(1), 1-37.

·       New evidence on the causal relationship between United States energy consumption and gross national product, Abosedra, S., & Baghestani, H. (1989). The Journal of Energy and Development, 285-292.

·       A gross national product function and the derived demand for imports and supply of exports, Kohli, U. R. (1978). Canadian Journal of Economics, 167-182.

·       Europe’s gross national product: 1800-1975, Bairoch, P. (1976). Journal of European economic history, 5(2), 273.

·       Gross national product in the United States, 1834–1909, Gallman, R. E. (1966). In Output, employment, and productivity in the United States after 1800 (pp. 3-90). NBER.

·       New estimates of gross national product, Canada, 1870-1926: Some implications for Canadian development, Urquhart, M. C. (1986). In Long-term factors in American economic growth (pp. 9-94). University of Chicago Press.

·       National infant mortality rates in relation to gross national product and distribution of income, Hales, S., Howden-Chapman, P., Salmond, C., Woodward, A., & Mackenbach, J. (1999). The Lancet, 354(9195), 2047.

·       Unit-root tests and the statistical pitfalls of seasonal adjustment: the case of US postwar real gross national product, Ghysels, E. (1990). Journal of Business & Economic Statistics, 8(2), 145-152.

·       Gross national product in Europe 1870-1910: some new estimates, Crafts, N. F. (1983). Explorations in Economic History, 20(4), 387.

·       New estimates of prewar gross national product and unemployment, Romer, C. (1986). The Journal of Economic History, 46(2), 341-352.

·       New estimates of gross national product for the united kingdom 1830–1914, Deane, P. (1968). Review of Income and Wealth, 14(2), 95-112.

·       Share of government in gross national product for various countries, Oshima, H. T. (1957). The American Economic Review, 47(3), 381-390.

 

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